Although the exclusive club of Kenya’s wealthiest is fast expanding, the sale of high-end goods and services targeting this segment of the market is still in its infancy.
According to the Wealth in Kenya report, there aren’t many local places that provide luxury services and goods for individuals of discerning taste who are not shy about digging into their wallets.
In food, cars and fashion, local High Net Worth Individuals (HNWI) do not have as many options as their counterparts in Europe or even in South Africa. This is despite the fact that this category of individuals in Kenya is expanding faster than the global average.
“Luxury brand stores have become commonplace in emerging market countries such as South Africa and Brazil. However, to date, Kenya has no luxury brand stores,” says the report by Oxford-and Johannesburg-based New World Wealth.
Kenya’s luxury goods market grew 60 per cent to be valued at Sh17 billion ($0.2 billion) between 2007 and 2013. However, this is barely a drop in the ocean given that the global luxury goods market was valued at Sh18.66 trillion as of November 2013.
The Kenyan market has not reached the maturity to support outlets by brands such as Louis Vuitton, Burberry, Chanel, Porsche or Lamborghini.
Data from the Kenya Motor Vehicle Industry Association indicate higher-end cars do not do very well locally in comparison with cheaper options. In 2013, only one Hummer was sold in Kenya while Jaguar sold four cars. In contrast, 3,216 Toyota cars were sold in the country during the same period.
But if branded fashion and super cars are not readily available locally as a status symbol, real estate in Kenya may be considered an alternative badge of honour. The hunger for prime real estate extends beyond Kenya’s borders.
Over the last few years, the wealthiest people locally have put their money into addresses abroad. The Burj Khalifa, the world’s tallest building, has repeatedly been advertised to Kenyans by Dubai’s Emaar Properties.
Seer Acquisition, a British real estate agency that targets locals with properties in London and Dubai, said in an earlier interview that it had sold real estate worth at least Sh1 billion to Kenyans in 2012.
The Mentor Group has locally been marketing three- bedroom apartments in Mauritius that sell for an average Sh43 million ($500,000).
Property for sale in the United States has also been regularly advertised in the Kenyan market.
Kenyans buy these properties eyeing high returns. However, for some, the addresses in London, Dubai and in Mauritius will be nothing more than an occasional holiday getaway.
Locally, Kenya’s wealthiest have over the last 50 years flocked to specific neighbourhoods. In Nairobi, the Wealth in Kenya report identifies Runda, Lavington, Muthaiga and Karen, among others. (READ: My guy, are you a member of the rich club?)
Property in any of these neighbourhoods does not come cheap.
In Muthaiga, the most expensive market for buyers, the Hass Consult Property index indicates that a house sells for an average Sh62.1 million. In Nyari, the most expensive market for renters, a unit goes for an average Sh251,700 per month.
“The real estate market is expanding, but you are finding demand is still highest in these upmarket areas. If you stay in Muthaiga or Karen, people associate you with affluence. It is like a badge of honour,” said Mr Daniel Ojijo of the Mentor Group.
Individuals investing in properties in these neighbourhoods are also assured of high returns, Mr Ojijo said.
Although Kenya has its share of luxury resorts and lodges, some charging as much Sh86,000 ($1,000) a night, these are often marketed to and frequented by foreign high net worth individuals.
“Rich Kenyans have a unique tourism experience. If they want more than a weekend away from Nairobi, they will go to France, Mauritius or South Africa where they can relax and also shop,” said Kenya Tour Operators chief executive, Mr Fred Kaigwa.
Another growing area of interest for Kenya’s richest is collectible art. The collector’s market locally has remained underwhelming for the last few decades. However, players in the sector claim that business is picking up.
On its website, Circle Art Agency, which set up operations in February last year, lists art that has been sold for more than Sh1 million. Although most of the interest in these pieces is from foreigners, Circle Art Agency told the Sunday Nation that in an auction last year, Kenyans made up between 40 and 60 per cent of all bidders.
“There is a growing market for African art, and Kenyans are starting to realise that art is an interesting and valuable area to invest in,” said Ms Fiona Fox, one of the agency founders.
Circle is now expanding its target market to the middle class. Next week, the firm will hold an exhibition featuring pieces on paper which are often cheaper than those done on canvas.
READING INTO THE FUTURE
In coming years, Kenya is expected to reach the tipping point that will lead to higher demand for luxury brands as patterns in emerging markets show.
“Different product categories enter the ‘hot zone’ at different moments: products with low price points, such as snacks and beverages, typically take off relatively early; beauty products somewhat later; and luxury goods, such as branded fashion, later still,” reads part of a McKinsey report on the rise of the African consumer.
Although many African countries, Kenya included, are yet to hit this “hot zone”, some analysts have pointed out that this continent may be the next frontier for luxury items. The Wealth in Kenya report indicates that a number of luxury brands, including Porsche, are likely to set up shop in Kenya in the coming years.
“Africa is increasingly demonstrating its attractiveness as a high-potential region,” said Consulting firm Bain and Company in a report last year.
Demographics will play a key part in this projected growth.
Currently, the majority of Africans are under 35. According to McKinsey, this is the age group that is the most brand-conscious, the age group that would be most willing to spend an extra coin in the name of prestige.
However, as the Wealth in Kenya report notes, 64 per cent of high net worth individuals in Kenya are over 50. With high unemployment rates in the region, the youth do not yet have the spending power to acquire coveted brands.
“Our surveys of the youth have shown that they consider prestigious brands to be important. However, they are not able to afford these things. Majority of shoppers are still in the middle and low income and until they can move upwards, this will remain the case,” said Consumer Insight Africa group managing director Ndirangu wa Maina.
For now, the youth is stuck to digging through second-hand offerings for these brands. Research by Consumer Insight Africa has indicated that as much as 51 per cent of Kenya’s youth spend money on secondhand clothes, known locally as mitumba.
- Daily Nation
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